Introduction

The manufacturing industry is the largest adopter of PO, accounting for nearly 60% of all multi-process PO contracts and nearly 50% of overall multi-process PO market revenues. In this report, we identify the underlying factors that drive manufacturing industry towards PO adoption. Everest Research Institute estimates that PO has the potential to generate US$50-150 million annual savings for a US$10 billion manufacturing organization. (see exhibit 1)

Exhibit 1: PO addressable cost base in manufacturing organizations


This report focuses on the manufacturing industry within PO and provides insights and trends into various manufacturing segments including automobile and auto parts, aerospace, chemicals and metals, consumer products, hi-tech, industrial, packaging, and pharmaceuticals. (see exhibit 2)

Exhibit 2: Distribution of PO contracts across manufacturing sub-industries


Everest analyses span multiple dimensions, including business case and market size of PO in manufacturing, and adoption trends and supplier landscape. This report will assist existing and potential manufacturing PO clients in understanding typical PO contract characteristics and leading suppliers across geographies and buyer sizes, and thus take more informed decisions. The report also helps suppliers to understand the drivers and the PO value proposition for manufacturing buyers. (see exhibit 2)

Scope

• Third-party PO contracts and does not include shared services or captives
• Multi-process PO contracts that involve outsourcing of three or more activities from the Source-to-Pay (S2P) process, with at least US$1 million in Annual Contract Value, and a contract length of at least three years
• All multi-process PO contracts across all industries and geographies signed as of 2008
• Suppliers with multi-process PO capability including Accenture, buyingTeam, Capgemini, Corbus, DSSI, EDS-HP, Genpact, Global eProcure, HCL, IBM , ICG Commerce, Infosys BPO, TCS, Wipro, WNS, and Xchanging

Contents

This report summarizes key PO market trends in manufacturing industry and facilitates PO stakeholders in taking informed business decisions. Key Insights are divided into two categories:

• Business case and market size of PO in manufacturing
• Adoption trends and supplier landscape

Each category contains key trends, which are discussed in detail (and illustrated with supporting data and analysis) to provide the reader information in easy-to-apply, bite-size pieces. For example, Adoption trends and supplier landscape section contains the following insights:

• U.S.-based large manufacturing buyers continue to be the leading adopters of PO and account for nearly 70% of contracts signed
• The process scope of manufacturing contracts is consistent with scope across all PO contracts with a strong focus on day-to-day purchasing, vendor and performance management, and spend analytics
• Offshoring in manufacturing contracts is on the rise. The percentage of manufacturing contracts having an offshore component increased from nearly 60% up to 2007 to 90% in 2008
• Adoption of supplier-owned sourcing and P2P PO systems is relatively lower among manufacturing buyers, as they already made large-scale investments in procurement systems. Most manufacturing buyers are looking at add-on tools to augment existing technology capability
• IBM and ICG Commerce account for over 60% of the annual contract value within manufacturing. Other key PO suppliers with manufacturing experience include Accenture, EDS-HP, Global eProcure, Infosys BPO, and Wipro